Samsung Wants To Build LoopPay Into Devices, And To Build A Holistic Mobile Wallet

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Samsung will acquire LoopPay, the companies announced today, and TechCrunch spoke with LoopPay CEO Will Graylin, Samsung Innovation Center EVP David Eun and Dr. Injong Rhee, EVP and head of Samsung Mobile about the smartphone maker’s plans for its new asset, as well as LoopPay’s tech and approach to mobile payments.

Samsung said it would be working toward building LoopPay’s technology into future devices, and stressed that this isn’t just about mobile payments: It’s about building a mobile wallet that is more comprehensive in scope, without requiring either merchants or consumers to change their behavior at a faster pace than they’re necessarily willing to accept.

“The LoopPay technology is so compelling because of its coverage,” offered Rhee, discussing how the magnetic secure transmission (MST) tech works with around 90 percent of existing payment terminals currently deployed in U.S. stores. “If you look at other competitor solutions in mobile payments [Apple Pay included], it’s actually based on near-field technology, which has very limited coverage in the U.S. We see the MST technology that LoopPay owns has a lot of potential to really solve the end-user coverage issues with respect to point-of-sale terminals.”

“This definitely has been a long-term relationship,” Graylin added. “In fact we closed that along with Visa and Synchrony [Financial] back in July of 2014, we just never announced that particular investment. So the relationship had been going on for longer than what the public might have guessed.”

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Rhee said that the unique MST tech was one reason for Samsung’s early and continued interest, but that wasn’t all. Other factors included the “shared vision” between the two companies, such as a desire to provide a compelling way to get users actually motivated to employ mobile payments solutions at scale. LoopPay’s expertise and talent with regards to this specific field, and how said attributes could be leveraged in combination with Samsung’s considerable resources and distribution network, added up to making the Boston-based startup a very attractive acquisitive target for Samsung in the end. Plus, Samsung saw the possibilities of building LoopPay tech directly into devices, eschewing the need for additional gear.

“Existing LoopPay solutions start off using accessories,” Rhee said. “We’re looking into actually building this solution into smartphone hardware.”

We’re looking into actually building this solution into smartphone hardware.

— David Eun, Samsung EVP

Eun added that while Samsung isn’t commenting on immediate product plans (including what will happen to existing offerings from LoopPay like the CardCase), we can expect to see something resulting from the partnership “in the near future.” The Galaxy S6 launch is looming large with a March 1 unveil, but Eun was reluctant to add specifics to upcoming product plans related to LoopPay.

“We talk about all these acronyms, like MST and EMV and all that stuff, but the reality is that there’s something like 20 billion credit cards out there, and credit cards work really well,” Eun said, elaborating more generally on LoopPay’s future potential. “That’s where the inertia and the momentum is, so if you’re one of the partners we’re speaking to in this ecosystem, whether merchants or banks or credit card issuers, I think everyone understands that there’s going to be credit cards out there for a while.”

While LoopPay is based on mag stripe tech, which is set for replacement in the U.S. by EMV (or chip -and-pin) based cards, Eun points out that the infrastructure will remain in place to support traditional credit cards for some time to come, and both consumers and merchants will be very slow to replace it entirely. LoopPay offers an opportunity to avoid the arduous task of convincing consumers and retailers to change the basic building blocks of the payment process, while offering a way to add security (LoopPay supports tokenization to add an extra layer of protection for the consumer) and opening the door to a digital wallet that can incorporate things like loyalty programs and bring more intelligence to the notion of a wallet in general.

“The first thing we need to solve is really the coverage issue, so that wherever you go you can actually use your mobile device for payments,” Rhee offered. “And then you’re adding a lot of other value-added service on top of that, plus the additional security that the plastic card may not be able to provide. A combination of the value-added service, like offering balances on your accounts, the ability to provision cards remotely, and the ability to protect your transactions using things like tokenization, all of that is making the solution a lot more compelling.”

But while that’s compelling, alone it won’t drive adoption, Rhee says. The key to that is solving the coverage and inertia problems, and that’s where a transmission tech like LoopPay’s MST has the potential to truly become an unlocking mechanism.

There are plenty of stories out there about ApplePay’s growing reach among payment providers, consumers and retailers, but the fact remains that the tech still has only a small fraction of the coverage potential of credit cards. Samsung’s LoopPay acquisition is about building a fast track to that 90 percent of old-school U.S. mag stripe credit card users, so as to make the benefits of a digital wallet appear that much more attractive. The plan is rife with potential, but the true test will come once we start to see devices arrive with LoopPay tech built-in, and judging by this interview, we shouldn’t have to wait too long for that to happen.